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Math
3.4.4: Oligopoly and Game Theory
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Market structures
Terms in this set (17)
Altruism
The willingness to bear a cost in order to benefit somebody else.
First mover advantage
When a business can develop a competitive edge through early entry into an industry
Game theory
Study of how people behave in strategic situations
Nash equilibrium
Where all agents in game are pursuing their best possible strategy given the strategies of all other participants
Tacit collusion
When businesses co-operate but not formally
Zero sum game
A game in which payoff gains and losses of individuals sum to zero, for all combinations of strategies they might pursue.
Payoff
Reward attributable to each decision made by a player in a game
Mixed strategy
Where a player chooses a random strategy
Dominant strategy
Action that yields the highest payoff for a player, no matter what the other players do
Overt collusion
Formal and open agreements between firms to minimise competition between them
Equilibrium
When a player uses a strategy that is the best response to the strategies of the other players
Sequential game
Strategic situation in which there is a strict order of play
Positive sum game
Win-win situation perhaps made possible by co-operative behaviour by players
Cooperation
Participating in a project that is intended to produce mutual benefits.
Pareto improvement
A change that at least benefits one person without making anyone else worse off.
Repeated game
A game in which the same payoffs, players, feasible actions may occur more than once.
Prisoner's Dilemma
A problem in game theory that demonstrates why two people might not cooperate even if it is in both their best interests to do so
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